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Internal Capital Markets in Business Groups: Evidence from the Asian Financial Crisis

The Journal of finance (New York), 2015-12, Vol.70 (6), p.2539-2586 [Peer Reviewed Journal]

2015 American Finance Association ;2015 the American Finance Association ;Copyright Blackwell Publishers Inc. Dec 2015 ;ISSN: 0022-1082 ;EISSN: 1540-6261 ;DOI: 10.1111/jofi.12309 ;CODEN: JLFIAN

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  • Title:
    Internal Capital Markets in Business Groups: Evidence from the Asian Financial Crisis
  • Author: ALMEIDA, HEITOR ; KIM, CHANG-SOO ; KIM, HWANKI BRIAN
  • Subjects: Aftermath ; Business growth ; Capital investments ; Capital markets ; Companies ; Conglomerates ; Economic crisis ; Investments ; Profitability ; Studies ; Valuation
  • Is Part Of: The Journal of finance (New York), 2015-12, Vol.70 (6), p.2539-2586
  • Description: This paper examines capital reallocation among firms in Korean business groups (chaebol) in the aftermath of the 1997 Asian financial crisis, and the consequences of this capital reallocation for the investment and performance of chaebol firms. We show that chaebol transferred cash from low-growth to high-growth member firms, using cross-firm equity investments. This capital reallocation allowed chaebol firms with greater investment opportunities to invest more than control firms after the crisis. These firms also showed higher profitability and lower declines in valuation than control firms following the crisis. Our results suggest that chaebol internal capital markets helped them mitigate the negative effects of the Asian crisis on investment and performance.
  • Publisher: Cambridge: Blackwell Publishing Ltd
  • Language: English
  • Identifier: ISSN: 0022-1082
    EISSN: 1540-6261
    DOI: 10.1111/jofi.12309
    CODEN: JLFIAN
  • Source: Alma/SFX Local Collection
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